Manufacturers to raise prices as electricity costs rise

Electricity prices have almost doubled in the last decade. Photo by VnExpress/Thanh Nguyen

With electricity bills a significant part of their production costs, Vietnamese manufacturers are set to increase their selling prices.

Do Duy Thai, chairman of Viet Steel, said that with electricity costs accounting for 8-9 percent of production costs, steel prices are set to go up. "We’re considering raising our steel prices by VND200,000 ($8.56) per ton," he told VnExpress International.

Other steel businesses also said they will increase their prices. Pham Manh Cuong, deputy director of Vietnam Italy Steel Jsc, said his company will raise its steel price by two percent, or VND61,000 ($2.63) per ton.

Vietnam's largest cement maker, the Vietnam Cement Industry Corporation (VICEM), said that its electricity bill will go up by VND20 billion ($855,730) per month, and product prices would rise, too. Local cement producers have announced that they will raise prices by VND30,000-50,000 ($1.29-2.16) per ton.

Nguyen Anh Tuan, head of the Electricity Regulatory Authority of Vietnam (ERAV), said there were around 1.4 million manufacturing businesses in Vietnam who spend on average VND12.39 million ($530) per month on electricity. The average increase in their power bills would be VND870,000 ($37.22) a month.

Economist Can Van Luc said that besides the manufacturing sector, small businesses are also likely to increase their prices, as they have done in the past following power price hikes.

On Wednesday, power prices went up by 8.36 percent to VND1,864 (8 cents) exclusive of VAT after remaining unchanged for two years. A household which uses 520 kWh a month will pay an extra VND83,000 ($3.55) now.

Vietnam Electricity (EVN), the country’s sole power distributor, said the hike would increase its revenues by VND20 trillion ($855.55 million), which it would use to cover higher production costs.

The hike could reduce Vietnam’s GDP by 0.22 percentage points this year and drive up prices by 0.29 percentage points, according to the Ministry of Industry and Trade. Inflation measured 3.54 percent in 2018.

While electricity prices have almost doubled in the last decade, it has so far remained below that of other Asian countries, the government has noted. The latest hike brings power prices on par with China and India, according to the Ministry of Industry and Trade.